Quick Facts

Burundi’s economic freedom score is 50.9, making its economy the 157th freest in the 2018 Index. Its overall score has decreased by 2.3 points, with a steep drop in fiscal health and lower scores for monetary freedom, property rights, and labor freedom offsetting an improvement in government spending. Burundi is ranked 34th among 47 countries in the Sub-Saharan Africa region, and its overall score is below the regional and world averages.

The government of Burundi has no development policy and no resources to counter pervasive poverty. Instead, it focuses on using subsidies and higher public-sector salaries to solidify loyalty to the regime. Burundi’s economy, hampered by extensive state controls and structural problems, lags in productivity growth and lacks dynamism. The lack of enforcement of property rights and the weak rule of law have driven many people and enterprises into the informal sector.

Background

Burundi gained independence from Belgium in 1962 and has had a turbulent history: Its first democratically elected president was assassinated in 1993 after 100 days in office. Using a technicality to sidestep the two-term constitutional limit, Pierre Nkurunziza was elected to a third term as president in 2015, sparking violence that killed more than 450 people. Western aid has been suspended because of the government’s flagrant abuses of human rights and poor implementation of policy. Fuel shortages caused by a lack of hard currency became a nationwide phenomenon in early 2017, bringing many businesses to a standstill, and the economy is stagnating. Subsistence agriculture dominates the economy, and well over half of the population lives below the poverty line.

Although private property can be registered, it is vulnerable to government expropriation and armed banditry. The judiciary is nominally independent but subject to political pressure. One of the world’s poorest nations, landlocked Burundi remains one of the most corrupt countries in sub-Saharan Africa. Government procurement is conducted nontransparently amid frequent allegations of cronyism. Customs officials reportedly extort bribes.

The top individual income and corporate tax rates are 35 percent. A value-added tax recently replaced the general sales tax. The overall tax burden equals 21.2 percent of total domestic income. Over the past three years, government spending has amounted to 26.7 percent of total output (GDP), and budget deficits have averaged 5.0 percent of GDP. Public debt is equivalent to 47.2 percent of GDP.

Overregulation and inefficiency burden the business environment. Obtaining electricity and construction permits, registering property, getting credit, paying taxes, trading across borders, enforcing contracts, and resolving insolvency are complicated processes. Agriculture employs more than 90 percent of the population. The state subsidizes fuel and electricity, influences other prices through state-owned enterprises, and has increased agricultural subsidies.

Trade is moderately important to Burundi’s economy; the combined value of exports and imports equals 38 percent of GDP. The average applied tariff rate is 5.4 percent. Nontariff barriers significantly impede trade. Government openness to foreign investment is below average. The financial sector is dominated by banks, with high levels of nonperforming loans and insufficient capitalization. Less than 1 percent of the population has access to bank loans.